Crowdfunding is the future of property investment
An entrepreneur has said crowdfunding is by far the most profitable way to invest in property after recent taxation and legislation changes.
Frazer Fearnhead is the CEO of The House Crowd, a property crowdfunding business which celebrates its fifth birthday this year.
The platform extends property investment opportunities to a wider range of the public, with a minimum investment level of just £1,000 and average first time investment of £3,000.
Fearnhead told BusinessCloud that investors in the properties funded by The House Crowd come from a variety of backgrounds.
“We have train drivers through to commodity brokers, doctors, lawyers, bankers and teachers,” he said.
“In the last six months we’ve seen quite a large influx of landlords due to changes in taxation and legislation which has virtually killed off the traditional buy-to-let industry – it’s very hard to make that industry profitable these days.
“Property remains a very attractive asset class to people but the only way for them to access it directly now is through crowdfunding.
“One landlord said the other day that he doesn’t know why he ever bothered with buy-to-let when he gets better returns from investing with us without all the hassle of looking after a buy-to-let portfolio.”
The House Crowd has raised more than £40 million from 15,000 investors to date. Fearnhead says the average investment overall is more than £20k, with users dipping their toes in before becoming serial investors when they begin to see returns.
Three hundred people have invested 10 times or more through the firm, which offers both equity- and debt-based products.
Now the entrepreneur, who was rejected on Dragons' Den in 2015, is releasing a book – The Alternative Guide to Property Investment by BlueSilver Publishing – to encourage others into the marketplace.
“The UK property crowdfunding industry was worth £700m in 2015, but most people I meet aren’t even aware that property crowdfunding even exists as an option,” he continued.
“I wanted to bring it to people’s attention, explain how it works, give people advice and the opportunity to explore it a bit more.
“It’s still at the early adopter stage and it’s going to be at least two or three years or more before crowdfunding becomes a mainstream investment option.”
The House Crowd has grown at a rate of 100 per cent for each of the last three years and Fearnhead says he is expecting to see that continue as he recruits marketing staff and brings IT development in-house.
“We’ve grown in the last five years from three people to an office of over 20 people – that’s going to grow another 50 per cent over the next couple of years,” he said.
“We’ve evolved already from buying £50k terraced houses to funding multi-million-pound newbuild developments, which has been an exciting part of our growth.”